Prior to the result of June’s European Union (EU) referendum, conveyancing seemed to be the most favourable area of law to be involved in. Firms which specialised in residential conveyancing had experienced fee growth of 15.4% on average last year, with commercial conveyancing firm fees rising by 8.7%, according to a study by Hazlewoods.
The property market was strong and had provided conveyancers with a steady income stream, a factor noted by the chartered accountant firm.
Partner at the firm, Patricia Kinahan commented on the market showing little signs of slowing down and that conveyancing specialists had been “reaping the rewards”.
Less confident in the continuance of the property boom however, was Nigel Haddon. The Law Society Management Committee member mentioned the slow-down experienced by various legal firms, “perhaps caused by referendum-induced uncertainty, by increases in stamp duty in the buy-to-let sector, or just a sense that we may be not far from the end of this cycle.”
The referendum decision to leave the EU was predicted to cause chaos in the property market and lead to great uncertainty for buyers, sellers and conveyancers alike.
Director of Hometrack, Richard Donnell forecasted a decline in price growth as well as housing turnover: ‘The decision to leave the EU will be most keenly felt in the London housing market which is fully valued and already facing headwinds. History shows that external shocks can reduce sales volumes by as much as 20% with volumes already down over the last year.”
Online property agent, Zoopla further predicted a vote to leave could reduce the UK’s housing stock value by £1.5 trillion.
Despite the widely expressed opinion that sales of property would suffer, this did not appear to be reflected in transaction figures.
Out of almost 600 live conveyancing cases being handled by The Partnership, only two clients had pulled out of deals. Managing Director, Peter Ambrose commented on the lack of real change in behaviour following the referendum result, despite the widespread fear: “We are not surprised to see immediate stabilisation, because in reality, nothing has changed.”
The number of buyers withdrawing from transactions had increased by 11% according to leading agent, Haart in comparison with June of 2015. They also stated however, that over the weekend following the decision, the number of new applicants registering (1,500) was the same level as the previous year.
Commenting on the effects being much less dramatic than anticipated was Paul Smith. The CEO of the agent stated: “While it’s true we have seen some buyers pull out of transactions due to the uncertainty caused by the Brexit vote, the effects haven’t been as great as we anticipated and we expect this to be a small blip as people come to terms with the result and get their head around what a Brexit means for them.”
Although at the time these figures may have been viewed as the calm before the storm, 3 months later the dramatic change the market was set to suffer has not been quite so dramatic.
Although the rise of house prices is slowing, nationwide there is still growth. Figures from Rightmove’s September report indicate a growth of 0.7% in comparison with August, with seven out of 10 English and Welsh regions observing prices remaining steady or growing by some margin.
Cooling price growth may also be due to the cyclical nature and corrective tendencies of the property market. Following dramatic price rises over recent years, the cost of homes may fall as a response to weakened affordability.
A further catalyst for market slowdown may be the increased stamp duty, introduced in April of this year. As opined by London Executive of the National Association of Estate Agents (NAEA), Jonathan Hudson, potential buyers are able to conduct more in-depth property research due to the fall in market fluidity.
However, property sales may receive a lift from various other factors.
The reduced interest rates in August, suggest Russell Quirk, may have provided an antidote for post referendum concern. The eMoov.co.uk founder further highlighted the cuts of the base rate to 0.25 “ensure that the UK economy continues to be underpinned by buoyant property prices”.
The drop in the value of the pound following the referendum result may have also provided the market with a boost.
78% of commercial property purchased in the heart of London from July to September was bought by overseas investors, compared to 57.8% in the previous quarter. The sterling devaluation pushed the total value of property bought by foreign firms to £2.813 billion.
The attractiveness of London based capital has grown due a “perception of opportunity” through the sterling’s fall, according to Richard Hassan. The Head of Cross Border Investment at property firm, Savills stated that London had been placed “in the global investor spotlight and, as a result, international investors have been notably active with a weight of money chasing, in particular, core assets with stable income.”
Despite these various market boosters, predictions for next year instead offer a more plateaued picture. According to Savills, two quiet years for the market lie ahead, the result of the EU referendum uncertainty paired with weaker consumer sentiment. The firm predicts that the average property price will remain consistent during 2017, with 2018 observing a modest 2% rise.
Although Savills state that growth in excess of 5% may return by 2019, they then forecast that property inflation will be reduced to 2% by 2021, following a medium-term economic hit as a result of Brexit.
Whilst the agent’s predictions read similarly to those of other property indexes, their opinions differ in regards to location of buyer demand. The general view is that buyers will seek to purchase in more affordable regions, as opposed to more expensive areas such as London.
Savills however, believe that declines will be seen by Scotland and the North-East, with areas such as the Midlands and the Capital remaining steady. Minimal growth of 2.5% will be seen by the South of England, allegedly.
The firm’s UK Head of Residential Research, Lucian Cook commented that despite the decline in transactions, first-time buyers would still face pressure. As the cost of buying a home remains high and supply declines, the prospect of funding a deposit becomes less and less realistic.
